UPDATE 1-Fremont General settles with Massachusetts

*Fremont General settles for $10 mln with Massachusetts

*Deal settles 2007 lawsuit on subprime loan practices

BOSTON, June 9 (Reuters) - Bankrupt subprime lender Fremont General Corp (FMNTQ.PK: Quote, Profile, Research) agreed to pay $10 million to settle a lawsuit alleging unfair loan practices with the state of Massachusetts.

Fremont, which has gone from being one of the biggest U.S. subprime mortgage lenders to operating under bankruptcy protection, also agreed to hold off on foreclosing on about 2,200 homes without certain protections for borrowers, Massachusetts Attorney General Martha Coakley said in a statement on Tuesday.

Defaults on subprime mortgages are blamed for the collapse of the real estate bubble that helped precipitate the U.S. financial crisis. Fremont was one of the 10 largest U.S. subprime-mortgage lenders until U.S. regulators ordered it in March 2007 to stop making risky home loans.

In a 2007 lawsuit, Coakley had accused California-based Fremont of engaging in predatory and unfair lending practices by making loans to individuals who could not afford them. Fremont denied wrongdoing.

The settlement comes on the heels of a $60 million deal last month to end litigation with Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) over a Massachusetts probe into whether the investment bank's subprime mortgage securitization business had encouraged unfair loans.

The state has also sued H&R Block Inc (HRB.N: Quote, Profile, Research) over what Coakley says are unfair practices making home loans to minorities.

"The American dream of home ownership has turned into a nightmare for many borrowers because of predatory lending practices," Coakley said in a statement on Tuesday.